There were lots of sunny smiles and warm words of praise exchanged this week as Prime Minister Yitzhak Rabin welcomed U.S. Secretary of State James Baker to Israel and then flew to Cairo for a summit meeting with Egyptian President Hosni Mubarak.

Israeli diplomats could only wonder how long the outpouring of international good will toward the week-old government would last.

Indeed, points of dispute between Israel and its neighbors were raised amid this week’s whirl-wind of diplomatic activity.

Yet the week, which included the first Israeli-Egyptian summit in six years, highlighted the dramatic impact Israel’s foreign policy reorientation is having on its relations with other countries.

Following the Labor Party’s upset victory in last month’s elections, even seasoned ambassadors of the Jewish state were taken aback by the cascade of relief and even rejoicing that poured in from dozens of world capitals.

“The latent sympathy which has always been there is flooding to the surface,” said one top Foreign Ministry official. “They think they’ve got the Israel they love to love again.”

A more realistic view was expressed by Egyptian President Mubarak’s close political aide, Osama el-Baz, who told officials accompanying the Israeli prime minister to Cairo on Tuesday that “we know it’s going to be tough with Rabin.”

“We shall still have disputes, over Jerusalem for example, or over the settlements,” Baz said. “But at least there is someone we can talk to at last.”

The Egyptian aide went on to attack Rabin’s immediate predecessor, Yitzhak Shamir, with a vehemence that embarrassed the new prime minister’s entourage.

CONCERN OVER TALKS WITH SYRIA

Mubarak’s desire to highlight his own gratification at the change of government in Israel was clearly part of the reason for inviting Rabin to Cairo so soon, even before the Israeli premier has visited Washington.

For six years, Mubarak stolidly spurned Shamir’s overtures for a summit meeting, arguing that such an event must produce “tangible progress,” agreed upon in advance.

Mubarak is still holding in reserve a further dramatization of the improved relationship, a visit by him to Israel, pending further progress in the peace process.

He told a joint news conference after his talks with Rabin that he had accepted the Israeli premier’s invitation and would come at a “convenient” but unspecified time.

Nonetheless, the atmospherics of the Cairo conclave this week left little doubt that Egypt is determined to seize upon the new thinking in Jerusalem to push the negotiations forward.

In particular, Mubarak is anxious to ensure that Rabin does not devote all of Israel’s peace-making energies to the Palestinian autonomy talks while downgrading the negotiations with Syria.

In his view, as in the view of many regional players, if Syria is left out in the cold, it can and will exercise a spoiling influence on the Palestinians.

This same line of reasoning was advanced by Baker during his visit to Israel earlier this week, which was followed by stops in Jordan, Syria and Egypt.

Like Mubarak, the secretary of state wanted to hear from Rabin that there is flexibility in his position regarding the Golan Heights and that he is willing to proceed toward at least an interim agreement with the Syrians, parallel with the Palestinian negotiations.

According to Israeli sources, Rabin has in fact softened his pre-election position that the Palestinian talks are the top and virtually the sole priority for the new government.

In a possibly significant statement, a leading non-government observer, reserve Maj. Gen. Shlomo Gazit, this week broached the idea of Israeli-Syrian progress toward some form of interim agreement regarding southern Lebanon.

Gazit, a former commander of military intelligence who is still considered an important figure in military and political circles, pointed out that the dangers of instability between Syria and Israel have focused almost exclusively on southern Lebanon ever since the Israeli-Syrian disengagement agreement was signed 18 years ago.

Rabin, for his part, raised the problem of southern Lebanon in his discussion with Mubarak on Tuesday, specifically in the context of his host’s assurances that Syria sincerely desires to advance toward peace.

Rabin asserted that Syria could significantly reduce the level of violence in southern Lebanon if it wished. Its influence over the Hezbollah and other hostile groups is overwhelming, he noted.

‘SATISFIED’ WITH SETTLEMENT POLICY

With the bilateral negotiations scheduled to resume soon, probably in Rome if security and logistics problems there can be solved, it will soon become clear whether the change of government in Israel will indeed catalyze momentum not only on the Palestinian front, but between Israel and all its Arab partners in the peace process.

Meanwhile, though, Israel hopes to reap some sizable dividends from its new flexibility on settlements in the administered territories, which the Bush administration has viewed as an obstacle to peace.

High on the agenda of Baker’s talks this week with Israel’s political and economic leadership was the Jewish state’s longstanding request for U.S. guarantees covering billions of dollars in loans, which would be used to create jobs and housing for new immigrants.

Baker indicated that if an agreement on settlements could be worked out, the loan guarantees would be forthcoming, possibly within a month or two.

Asked in Cairo how near he was to such an agreement with the Israelis, Baker told reporters Wednesday that some of the details “are still to be worked out.”

But in a noticeable change in tone from the icy rhetoric used with the Shamir government, the American secretary said: “I am really very satisfied with the philosophy and the orientation of this new government of Israel toward the question of settlements. And I am satisfied that you are going to see a severe and substantial reduction in settlement activity.”